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Women on boards cool risk of environmental lawsuits, study claims

As countries decide whether or not to install boardroom gender quotas and respond to stats on the gender pay gap, research from the University of Adelaide has found that women on boards can save companies millions on environmental lawsuits

Having women on boards can cool the chances of companies facing environmental lawsuits, according to a new study.

Research from the University of Adelaide, in Australia, found that every woman on a company board reduced its risk of facing an eco-suit by 1.5%.

But the study by Dr Chelsea Liu published in the Journal of Corporate Finance also found that female chief executives are only linked with reduce environmental lawsuit risks when the company board has less gender diversity.

There were just under 1,900 environmental lawsuits from 2000 to 2015 against firms listed on the Standard & Poor’s index of 150 companies with the largest and most liquid stocks.

Dr Chelsea Liu said: “With corporate environmental responsibility becoming a more important social issue, these findings can have significant implications for policymakers, investors and managers.

“Environmental violations not only have a significant impact on societies, but they can also cause devastating losses of shareholder value.”

The study found that each woman on a company board could save it as much as $3.1m (£2.41m) on the $204m (£158.54m) average environmental lawsuit.

 

Why women on boards reduce environmental lawsuit risks

Female business leader

Dr Liu said that it was the number of women on boards that had the most impact on reducing the threat of environmental lawsuits when compared to the effect of female chief executives.

“Gender diversity is what’s important – female representation on boards is most important where the CEO is male, and less important if the CEO is female,” said Dr Liu.

“This can be attributed to ‘diversity theory’, which says that a group of people from more diverse backgrounds – gender, race etc – tend to make better collective decisions, because they canvas a wider range of perspectives.

“Having a range of perspectives can result in improved corporate environmental policy, which in turn can reduce exposure to environmental lawsuits.”

According to the author, gender socialisation and ethics theories suggested that women tended to be more caring as a result of upbringing, making them more environmentally conscious in the boardroom.

Dr Liu added that her research was the “business case” for the creation of boardroom gender quotas.

Research from the accounting firm EY looking at the same time frame found that women held just 16% of company S&P 1500 board positions by 2014.